you need an obd1 engine as the obd2 has different sensors and different loom as well as ECU, you will need to replace the whole loom if its an obd2

Best off just finding an OBD1 engine, that will save a shed load more work, the other option is a 323 2.0 kfze or a ford probe has the klde in it

The engines are pretty much the same, expect that the newer one lacks one extra coolant sensor (not neccesary though).

So yes, you could swap that engine in but as you mentioned you need to source a OBD1 ECU from a 626/MX6/Probe. A DE is a very good and cheap option with good torque and power so i would say, go for it. And yes, the gains with headers, de-cat and 2.5" exhaust is real good, frees up much more HP compared to the K8.

I've done a KLDE & KLZE conversion, either are a massive improvement on the K8, but definately go for OBD1 as I don't think anyone has succesfully done a OBD2 - OBD1 conversion, pretty sure admin tried it but could not do it